RP Assured of $2-B Miyaza Loan

Manila Standard

Wednesday, December 23, 1998

By DAY-ANNE E. DANCEL

The Philippines is likely to get at least $2 billion out of the $5 billion in financial assistance it is seeking from Japan's Miyazawa package, according to Finance Secretary Edgardo Espiritu.

"The package for the Philippines would likely he announced by the end of the month,” Espiritu said in an interview. Japan recently approved $1.5 billion in financial support for Malaysia and $1.8 billion for Thailand.

He said the Miyazawa loans would be used for co-financing $900 million worth of loans from multilateral agencies such as the World Bank (WB) and Asian Development Bank (ADB).

Meanwhile the Bangko Sentral ng Pilipinas (BSP) announced plans to enter into a currency swap with Japan. The swap will involve $400 million under the short term facility of the Miyazawa package where at least $10 billion will be available to qualified countries.

We will bridge the co-financing (from Japan for the Philippine government) through a currency swap,” BSP Gov. Gabriel Singson said Monday night.

Finance Undersecretary Joel Banares said the co-financing from Jeximbank and OECF for the first tranche of the program loans from WB and ADB would likely come in by March or April.

Jeximbank was interested to co-finance the initial $100 million for banking sector reform from WB and another $100 million for power sector reform loan from the ADB. The OECF, on the other hand, committed to double the initial tranche co-financing for the ADB’s air equality loan to $200 Million.

BSP Managing Director Amando Tetangco Jr. said the proceeds of the currency swap would be used for “reserve management" since the foreign exchange would help boost the gross international reserves (GIR). Swaps refer to the simultaneous purchase and sale of goods, currencies in this instance at different maturities.

Banares said the Philippine government asked the Japanese Export and Import Bank to co-finance the $300 million power sector loan from the ADB and 5300-millron banking sector reform loan from the WB. The Overseas Economic Cooperation Fund was being tapped to provide parallel financing for the $300-million air quality improvement loan also from the ADB.

“The interest for the co-financing facilities will be lower than what the WB or ADB is charging,” Espiritu said.

He noted Japan also committed to purchase $250 million of the total $500-million Samurai bond issue being proposed by the Philippine government

Espiritu said the proposed funding assistance for national flag carrier Philippine Airlines (PAL) under the Miyazawa initiative would come in later because several conditions would still have to be most for this package.

He said among these conditions were the approval of the rehabilitation plan for PAL by creditors and the rehabilitation of its management through the entry of a strategic partner or the hiring of competent manager.

"Without these elements, the government could not give its support to PAL," he said.

The government wanted to top government financial institutions like the Development Bank of The Philippines (DBP) arid the Land Bank of the Philippines (LBP) to avail a two-step loan from Japan for relending to PAL The ailing airline needed at least $1.5 billion in fresh infusion to bring its operations back to profitability.

The Philippine government already pruned down the list of projects being requested for Japanese assistance to almost $5 billion from an original $9.3 billion

Aside from the co-financing of program loans, the government also hopes to get support for relending facilities DBP and LBP worth a total $1.4 billion and financing for various projects worth $1.05 billion.